Assessee's alleged LTCG and credit entries held bogus; addition under s.68 sustained due to insufficient evidence

ITAT held that the assessee's claimed LTCG and related credit entries were bogus and upheld the AO's addition under s.68. The tribunal found documentary evidence insufficient, surrounding circumstances and suspicious penny-stock transactions showed the entries were not genuine, and the assessee failed to discharge the onus. CIT(A)'s acceptance of the documents was reversed. Revenue's invocation of s.68 was sustained and the addition confirmed.

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Issues Involved:

1. Deletion of addition made u/s 68 of the Act regarding suspicious transactions in shares.
2. Justification of exemption claimed u/s 10(38) of the Act for Long Term Capital Gain (LTCG).
3. Examination of the genuineness of transactions and documentary evidence provided by the assessee.

Summary:

Issue 1: Deletion of addition made u/s 68 of the Act regarding suspicious transactions in shares

The Revenue challenged the CIT(A)'s decision to delete the addition of Rs. 33,30,995/- made u/s 68 of the Act, arguing that the transactions in shares were suspicious and part of a larger scam of organized tax evasion through bogus capital gains in penny stocks. The AO concluded that the transactions were sham, aimed at bringing unaccounted money in the guise of exempt LTCG.

Issue 2: Justification of exemption claimed u/s 10(38) of the Act for LTCG

The AO found that the shares of M/s. Unno Industries Ltd., a penny stock company, were used to generate bogus LTCG. The assessee had not disclosed the LTCG in the return of income, claiming it was an inadvertent error. The CIT(A) allowed the appeal of the assessee by merely relying on previous decisions without independently examining the evidences brought on record by the AO.

Issue 3: Examination of the genuineness of transactions and documentary evidence provided by the assessee

The Tribunal found that the CIT(A) had not independently examined the evidences and had merely followed previous decisions. The AO had conducted detailed enquiries and found that the transactions were manipulated, with the shares of M/s. Unno Industries Ltd. being used for generating bogus LTCG. The Tribunal emphasized that the genuineness of the entire transaction, including the purchase of shares, needed to be examined.

The Tribunal noted several discrepancies and adverse evidence, such as the off-market purchase of unlisted shares from an unknown broker, payment made after 4 & ½ months, and the dematerialization of shares just before the sale. The Tribunal concluded that the transactions were not genuine and that the assessee had not discharged her onus against the adverse evidences brought on record by the Revenue.

The Tribunal reversed the CIT(A)'s decision and confirmed the addition made by the AO, concluding that the exempted LTCG claim was a facade to conceal the true nature of the credit entry of Rs. 33,30,995/-.

Order:

The appeal preferred by the Revenue is allowed.

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